This Oil Stock Bargain Has Takeover Potential And It Trades Below Book Value

| About: Nabors Industries (NBR)
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A recent correction in the price of oil has taken many oil sector stocks back to very attractive levels. Buying dips in these stocks when the price of oil has taken the sector lower has been a winning strategy for many investors over the past couple of years. While there are valid economic concerns that have led to lower oil prices, the mid to long-term outlook remains strong for oil as population growth, continued money printing by central banks around the world and potential inflation are likely to keep oil from falling too far. Geopolitical problems in the Middle East are also likely to keep a bid under oil. Here is a closer look at one oil sector stock that appears to be a bargain:

Nabors Industries, Ltd. (NYSE:NBR) shares recently jumped up to about $16.50, but the stock has given back nearly $3 worth of gains, and it now trades for just $13.85. It is one of the largest providers of drilling, fracking, engineering, transportation and other services to oil and gas companies. It owns and operates approximately 501 land drilling rigs. Naturally, this line of business gives it exposure to oil and gas companies, both large and small throughout the United States, as well as internationally. While it could be impacted by a slowdown in the energy business, the shares look oversold and cheap for a few reasons:

1) Nabors Industries recently reported solid financial results. For the second quarter of 2012, net income from continuing operations, excluding certain non-cash charges, was $109.7 million, or 38 cents per share. This compares favorably to $70.9 million, or 24 cents per share during the second quarter of 2011.

2) The shares trade for just about 7 times earnings while the average stock in the S&P 500 trades for about 15 times earnings. Furthermore, the shares trade significantly below book value which is $19.70 per

3) Nabors Industries has been considered as a possible takeover target in the past by some investors and the company seems to agree with that potential. Just a couple of months ago, the board of directors announced it adopted a shareholder rights plan under which shareholders will receive rights to purchase shares of a new series of preferred stock. According to Nabors website: This was done to ensure "the fair and equal treatment of the company's shareholders in connection with any initiative to acquire effective control of the Company. It is intended to reduce the likelihood that any person or group would gain control of Nabors by open market accumulation or otherwise without paying a control premium for all common shares."

With the stock now trading just barely above the 52-week low,
investors who like to buy bargains should consider this stock now.

Here are some key points for NBR:
Current share price: $13.96
The 52 week range is $11.05 to $22.73
Earnings estimates for 2012: $1.89 per share
Earnings estimates for 2013: $1.82 per share
Annual dividend: none

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informational purposes only. You should always consult a financial

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.